November 13, 2026 update. CMS clarified in SMD 26-006 that determinations covered by an approved community-engagement mitigation plan are excluded from PERM error findings when they meet the approved terms. For a sampled payment, trace the underlying eligibility action back to the application filing or renewal initiation date and the approved plan. The payment date determines the sampling window, while the case history and plan terms determine whether the action qualifies for protection. See the hold-harmless special edition.
When the next Medicaid Payment Error Rate Measurement (PERM) findings arrive, the natural first question will be which states posted the highest or lowest rates. That may be the least useful question for state executives. The more consequential question is whether the weaknesses behind a rate can be identified, corrected, and independently shown to stay corrected before the next sampling period.
Seventeen states are in PERM Cycle 2 for reporting year (RY) 2026. The Centers for Medicare & Medicaid Services (CMS) says the sampled claim review period ran from July 1, 2024, through June 30, 2025. That distinction matters: results reported in 2026 describe earlier payments and eligibility decisions. They cannot measure the impact of Medicaid community-engagement requirements that had not yet taken effect. [1, 2]
A baseline, not a forecast
The forthcoming Cycle 2 results are best treated as a historical baseline. They may indicate where states had trouble with documentation, required verification, eligibility calculations, processing timeliness or payment rules during the review period. They cannot tell us whether those conditions remain unchanged today, whether an individual case constituted fraud, or how much federal reimbursement a state will eventually lose.
The national Medicaid improper-payment rate combines information across components and, in its rolling presentation, across three state review cycles. A state-specific eligibility estimate answers a different question from a national combined rate. The fee-for-service, managed-care and eligibility components also have different underlying review processes. Treating them as one undifferentiated score can lead decision-makers to aim a corrective action at the wrong process. [1, 3]
Four questions before any ranking
First: what is being measured? A manager assessing eligibility evidence needs the eligibility component, not the overall program rate. A contract manager reviewing managed-care payments needs the relevant managed-care findings. The measures may interact, but they are not interchangeable.
Second: how precise is the estimate? A point estimate is not a census of every decision. State-level estimates and comparisons should be read alongside available confidence intervals and the payment denominator. A difference in percentages may be less informative than it looks when the uncertainty around the estimates is considered.
Third: why was the payment classified as improper? CMS cautions that an improper-payment rate is not a fraud rate. One finding may involve a person who was substantively ineligible; another may reflect an incomplete record that prevented reviewers from confirming eligibility. Those circumstances call for different interventions, different evidence and different safeguards. [1]
Fourth: what happened after the problem was found? A completed training session, revised procedure or system ticket tells us an activity occurred. It does not, by itself, establish that later eligibility decisions were more accurate, that the repair survived another renewal, or that eligible individuals were protected from erroneous denials.
The second clock: before 2029
CMS reviews Cycle 2 states on a three-year rotation. On that rotation, their next review is expected in RY2029, with an anticipated sampled period of July 1, 2027, through June 30, 2028; CMS should confirm the operative schedule. Separately, Section 71106 of Public Law 119-21 changes the treatment of certain erroneous excess Medicaid payments beginning in federal fiscal year 2030, which starts October 1, 2029. The conjunction of those dates deserves advance planning. It does not establish that CMS has determined which states will face reductions or what any future reduction will be. [2, 4]
The law retains a 3% allowable error-rate framework while changing the potential scope of federal waiver relief, including treatment of payments for which information is insufficient to confirm eligibility. But a state rate over 3% is not automatically a payable invoice; the governing statutory calculation, audited findings, federal determinations and available relief matter. A state cannot responsibly convert a preliminary PERM percentage into a future dollar disallowance by multiplication alone. [4]
The operational urgency is real without that speculation. A defect discovered early enough to correct may stop additional unsupported payments. A missing document recovered today may establish the validity of an earlier decision—but only if it is the right historical evidence. A new verification today cannot silently rewrite what was known at the original determination. Both cases require retained dates, provenance, authorized action and a reviewer who can reconstruct the sequence.
Corrective action is not the same as demonstrated effectiveness
The U.S. Government Accountability Office’s (GAO) 2026 review of PERM and Medicaid Eligibility Quality Control (MEQC) oversight found that CMS had accepted some PERM corrective action plans without all required evaluations. GAO also found that CMS was not systematically analyzing eligibility errors and related corrective actions across states and reporting years to determine which interventions proved effective. CMS described steps it had taken and planned in response; GAO nevertheless called for additional oversight. [5]
This provides a useful test for every state when the new results appear: can it show that its previous corrective actions improved operations and efficiency, reduced error counts and improper payments, and helped meet its assigned PERM targets? Federal regulations also require attention to whether corrective actions may increase improper eligibility denials. The administrative target should be both accurate approvals and protection against incorrect loss of coverage. [5, 6]
Even before the latest percentages are public, a state can select one recurring defect category, retrieve representative historical cases, identify which systems and staff controlled each handoff, and verify whether the relevant evidence remains accessible. It can then confirm who is authorized to correct the issue, how the correction changes an effective period or payment, and who will independently retest a later case. That is more useful than waiting for a ranking to determine which issue deserves an owner.
Temporary CMS mitigation adds another control to examine. The October 21 checklist calls for approved plans, compliance with their conditions, and milestone reporting. That framework does not itself establish how a payment will be classified in PERM. Preserve the approval, applicable dates, conditions, and case evidence; obtain CMS clarification where treatment is unresolved. Our November 6 special briefing explains the operational distinction. [7]
What state leaders can do before the report
Begin with one narrow question: if CMS requested the evidence today, could someone outside the original eligibility unit reproduce why the person was eligible, what rule applied, what the case contained at the decision date and which subsequent payments depended on that determination? If the answer is uncertain, assign an owner and test the missing link. If the answer is yes, verify that a second reviewer reaches the same conclusion from the retained record.
That is the educational objective behind 97 or Better™ — Before 2029. It is not a CMS standard or certification. It is a challenge to make accurate, supportable Medicaid eligibility decisions repeatable under ordinary workloads, not merely defensible when an audit arrives.
The next PERM scorecard will tell states something important about past payments. The test of leadership is what changes in the next case—and whether the evidence proves the change held.
Prepare before the results
PERM Pre-Cycle Readiness Matrix — Review control ownership, evidence gaps and retrieval readiness.
Corrective Action Effectiveness & Closure Checklist — Test whether corrective actions worked, lasted and protected eligible members.
Shadow PERM Implementation Guide — Run bounded independent readiness tests before federal sampling.
Sources and evidence limitations
[6] CMS, PERM Corrective Action Plan Process; 42 CFR 431.992[7] CMS, Proposed State Mitigation and Optional Strategies checklist, p. 1, circulated with the October 21, 2026 state-director email; reviewed November 2, 2026. Public posting of the exact checklist not located.
Interpretive note: The FY2030/RY2029 timing intersection is an editorial inference. Results are historical sampled estimates, not findings of fraud or final federal disallowance. Mitigation context added November 2, 2026.